Financial plan contains the sets of financial statements that predict the resource implications of
decision making in business For instance, short term and long term financial planning. Our
company financial plans have been made out for 3 years plans forecast to suit the marketing
In the first year, we will manufacture the product through the vendor and distributing the product
starting in the week 6 of manufacturing and forecasting sales in the week 6 of sales. Our
company focus is England as a target market for all 3 years plus having the product advertised
and sells through the internet world wide at the same time.
Company target for the first year sales is expected to gain 3000-5000 units will be sold. Upon
successful sales in the first year, we till then expanse the quantity of the products and is
expected will increasing the sales significantly. The sales will continuously growing in the next
year of 2011 and during this year we are expecting the total products will be achieved around
5000-8000 units. By the year 2012, it is forecasted that we will distributing the product much
higher than the previous year and is expected to gain about 8000-10,000 units respectively.
Product Cost for Each Unit
Production Cost per Unit
(Including raw material, taxes, shipping & vendor cost)
Retail Price £90
Company Profit £55
1) Premise / Building:
The rental cost of the premises will be £600 per month. We will occupy 1 office at Bristol
for our head quarters office. We choose this location due to port’s area where it is a very
strategic location so that the shipping activity will be easier to handle.
Total rent: 12months x £600 = £7,200 per annum
2) Office facilities:
In the first month basis, we estimated to spend £15,000 for office renovation and facilities. For
the facilities, we will buy all stuff need for the office such as furniture and renovation is (£8,500),
and equipments (£6,500).
Total Estimation Cost is £15,000.
(This cost will be spent during the startup year in the first year of company establishment only)
3) Power Electricity/Gas & Telephone Bills
For billing facilities, we’ve decided to subscribe under (BT’s) Business Package, includes calls
and internet access (Broadband). Total cost including lighting, heating, air-conditioning and
other’s electrical consuming bills is estimated will be not more than £2000 per month.
Estimated power & telephone bills consumption is £24,000 per annum.
Insurance costing for covering the premise is very important. Usually there must often have
plate glass insurance for office in addition to general business insurance.
Total of insurance is £2,500 per annum.
Includes office supplies, stationary, paper, rates, cleaning, etc. is estimated of £2,000 per
In order to bring our products to the eyes of the world, we've chosen to promote our products
through the internet via our company website. At the same time we will also make an
advertisement through television, radio and trip tour. Hence, we've decided to put a budget
around £9,000 for each year
Total marketing budget will be of £9,000 per annum.
7) Raw Material
The raw material for a unit product has cost of £32.80. This includes the components to be
installed into the product itself. The cost of raw material is quite low because we order the parts
from China which is cheaper and with a good quality as well.
Seems that we are sourcing, producing & assembling the products through vendor in China,
there will be highly necessary for the shipping to be well considered. Moreover, we’re also
selling the products worldwide through the internet and it acquired shipment for each unit sold.
After well consideration, we chose to subscribe shipment from Gigabiz.com. It does provide the
cheapest shipment for importing and exporting between UK & China so far.
From China to UK – £0.65 per unit
Delivery Service to:
Within Europe - £0.50 per unit
Worldwide - £0.80 per unit
9) Sum Payable for Vendor Services & Taxes
Vendor in China
Vendor cost per unit : £1.25 (12.04 Chinese Yuan)
Taxes per Unit (0.86%) : £0.30
Total vendor service & taxes per unit = £ 1.55
10) Staff Wages:
Position Person(s) Salary per month (£) Salary per annum (£)
Manager 1 £3,200 £38,400
Assistant Manager 1 £2,800 £33,600
Senior Engineer 1 £2,500 £30,000
Junior Engineer 1 £2,200 £26,400
Technician 1 £1,600 £19,200
Administrative Officer 1 £1,200 £14,400
Receptionist 1 £900 £10,800
(£2,000 per person)
Marketing 2 £48,000
Accountants 1 £2,000 £24,000
IT & Software Development 1 £ 1,800 £21,600
Total staff is 12 persons.
Total staff wages is £266,400
5.3. Financial Considerations
The Company’s start up costs will be £350,000. Owners equity will be provide £150,000 and
another £200,000 will consist of long-term loans. The majority of the start-up costs will consist of
rent, research and development, initial stock, and a strong cash account.
Fixed Costs are business expenses that are not dependent on the activities of the business.
They tend to be time-related, such as salaries or rents being paid per month. In another hand,
variable costs are expenses that change in proportion to the activity of a business. In other
words, variable cost is the sum of marginal costs. It can also be considered normal costs. Along
with fixed costs, variable costs make up the two components of total cost. Our company fixed
costs and variable costs are:-
Fixed Cost Amount
Premise / Building £ 7,200.00
Office facilities £ 15,000.00
Power & Telephone Bills £ 24,000.00
Insurance £ 2,500.00
Miscellaneous £ 2,000.00
Marketing £ 3,000.00
Staff Wages £ 266,400.00
Depreciation* £ 6,750.00
Total £ 326,850.00
Depreciation 45% (Office Facilities)
Variable Cost Amount
Shipping £ 0.65
Vendor Services & Taxes £ 1.55
Raw Material £ 32.80
Total £ 35.00
Fixed Cost £ 326,850.00
Variable Cost/unit £ 35.00
Selling Price/unit £ 90.00
Contribution £ 55.00 *Selling Price - Variable Cost
Contribution to Sales Ratio £ 0.61 *Contribution/Sales Ratio
Breakeven Quantity 5,943 *Total fixed cost / (Selling Price/unit - Variable Cost/unit)
*Total fixed cost / Contribution to sales ratio
Breakeven Revenue £ 534,845.45
Breakeven Analysis shows Digital Experts ltd. will be able to make a steady profit by the 3rd
Quarter of 2011. The break-even point is only 5943 units per month, while projected sales are
one to three times from that figure.
Production Cost Analysis (Year 2009)
Number of Vendors 1
PRICES AND DELIVERY COSTS IN UNITS
Vendor Bid Price Delivery Cost/Unit Tax/Unit Total Price/Unit
1. Vendor £ 32.80 £ 0.65 £ 1.25 £ 0.30
Average Delivered Price Per Unit £ 35.00
ALLOCATION OF ORDERS AND COSTS
Actual Delivered Amount
Vendor Order Price/Unit of Order
Vendor 5,000 £ 35.00 £175,000.00
Total Amount of Order £175,000.00
Total Vendor Costs £ 6,250.00
Total Bid Price £164,000.00
Total Cost of Order £175,000.00
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